This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

56049 

Vol. 71, No. 186 

Tuesday, September 26, 2006 

DEPARTMENT OF AGRICULTURE 

Federal Crop Insurance Corporation 

7 CFR Part 457 

RIN 0563–AB96 

Common Crop Insurance Regulations, 

Basic Provisions; and Various Crop 

Insurance Provisions 

AGENCY: Federal Crop Insurance 

Corporation, USDA. 

ACTION: Notice of reopening and 

extension of comment period. 

SUMMARY: The Federal Crop Insurance 

Corporation (FCIC) is reopening and 

extending the comment period for the 

proposed rule published in the Federal 

Register on Friday, July 14, 2006 (71 FR 

40194–40252). The proposed rule 

contains certain provisions to combine 

and provide revenue protection and 

yield protection within one standard 

crop insurance policy, and to improve 

prevented planting and other provisions 

to better meet the needs of insured 

producers. During the comment period, 

FCIC received comments that due to the 

complexity of the proposed changes, 

sixty days was not adequate to properly 

address all the issues. FCIC agrees that 

additional time is appropriate to ensure 

that all interested persons have time to 

fully review the proposed rule and 

provide meaningful comments. 

DATES: Written comments and opinions 

on this proposed rule will be accepted 

until close of business October 26, 2006 

and will be considered when the rule is 

to be made final. 

ADDRESSES: Interested persons are 

invited to submit comments, titled 

‘‘Combination Basic and Crop 

Provisions’’, by any of the following 

methods: 

• By mail to: Director, Product 

Administration and Standards Division, 

Risk Management Agency, United States 

Department of Agriculture, 6501 Beacon 

Drive, Stop 0812, Room 421, Kansas 

City, MO 64133–4676. 

• E-mail: DirectorPDD@rma.usda.gov. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

A copy of each response will be 

available for public inspection and 

copying from 7 a.m. to 4:30 p.m., c.s.t., 

Monday through Friday, except 

holidays, at the above address. 

FOR FURTHER INFORMATION CONTACT: For 

further information contact Louise 

Narber, Risk Management Specialist, 

Product Management, Product 

Administration and Standards Division, 

Risk Management Agency, at the Kansas 

City, MO address listed above, 

telephone (816) 926–7730. 

SUPPLEMENTARY INFORMATION: 

Background 

On Friday, July 14, 2006, FCIC 

published a proposed rule in the 

Federal Register. The rule proposed 

changes to the Common Crop Insurance 

Regulations; Basic Provisions, Small 

Grains Crop Insurance Provisions, 

Cotton Crop Insurance Provisions, 

Coarse Grains Crop Insurance 

Provisions, Malting Barley Crop 

Insurance Provisions, Rice Crop 

Insurance Provisions, and Canola and 

Rapeseed Crop Insurance Provisions. 

The proposed rule contains certain 

provisions to combine and provide 

revenue protection and yield protection 

within one standard crop insurance 

policy, and to make other changes to 

existing policy provisions to better meet 

the needs of the insured. 

The proposed rule public comment 

period of 60 days ended on September 

12, 2006. Based on several requests 

received during the comment period, 

FCIC is reopening and extending the 

comment period until October 26, 2006. 

This action will allow interested 

persons additional time to prepare and 

submit comments regarding the 

proposed rule. 

* * * * * 

Signed in Washington, DC, on September 

19, 2006. 

Eldon Gould, 

Manager, Federal Crop Insurance 

Corporation. 

[FR Doc. 06–8216 Filed 9–25–06; 8:45 am] 

BILLING CODE 3410–08–P 

SMALL BUSINESS ADMINISTRATION 

13 CFR Part 115 

RIN 3245–AF39 

Surety Bond Guarantee Program— 

Preferred Surety Bond Surety 

Qualification, Increased Guarantee for 

Veteran and Service-Disabled VeteranOwned Business, Deadline for 

Payment of Guarantee Fees, Denial of 

Liability, and Technical Amendments 

AGENCY: U.S. Small Business 

Administration (SBA). 

ACTION: Proposed rule. 

SUMMARY: This proposal encompasses 

six objectives. It would give effect to the 

statutory reduction in the frequency of 

audits required of Preferred Surety Bond 

(PSB) Sureties. It would obligate SBA to 

guarantee 90 percent of the Loss 

incurred by a Prior Approval Surety on 

bonds issued on behalf of small 

businesses owned and controlled by 

veterans, including service-disabled 

veterans. It would impose a 45-day 

deadline on Sureties for the remission of 

surety fees to SBA in lieu of the present 

requirement of payment in the ordinary 

course of business, and would allow 

SBA to deny liability if payment is not 

timely made. It would allow PSB 

Sureties to charge premiums in 

accordance with applicable state 

ceilings, as presently permitted under 

the Prior Approval Program. It would 

delete the existing reference to the 

expiration of the PSB Program and, 

finally, it would allow Affiliates of a 

PSB Surety to participate in the Prior 

Approval Program. 

DATES: Comments must be received on 

or before October 26, 2006. 

ADDRESSES: You may submit comments, 

identified by RIN number 3245-AF39, 

by any of the following methods: (1) 

Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments; 

(2) Fax: 202–205–7600; (3) Mail: Barbara 

Brannan, Special Assistant, Office of 

Surety Guarantees, U.S. Small Business 

Administration, 409 3rd Street, SW., 

Washington, DC 20416; or (4) Hand 

Delivery/Courier to Office of Surety 

Guarantees, U.S. Small Business 

Administration, 409 3rd Street, SW., 

Washington, DC 20416. 

FOR FURTHER INFORMATION CONTACT: 

Frank Lalumiere, Associate 


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56050 Federal Register / Vol. 71, No. 186 / Tuesday, September 26, 2006 / Proposed Rules 

Administrator, Office of Surety 

Guarantees, (202) 205–6540 or 

frank.lalumiere@sba.gov. 

SUPPLEMENTARY INFORMATION: The U.S. 

Small Business Administration (SBA) 

can guarantee bonds for contracts up to 

$2 million, covering bid, performance 

and payment bonds for small and 

emerging contractors who cannot obtain 

surety bonds through regular 

commercial channels. SBA’s guarantee 

gives sureties an incentive to provide 

bonding for small businesses and 

thereby strengthens their ability to 

obtain bonding and greater access to 

contracting opportunities. SBA’s 

guarantee is an agreement between a 

surety and the SBA that provides that 

SBA will assume a predetermined 

percentage of loss in the event the 

contractor should breach the terms of 

the contract. 

Several changes to the regulations 

governing SBA’s Surety Bond Guarantee 

(SBG) Program are proposed in this 

rulemaking. The purpose of these 

amendments is to improve the operation 

of the SBG Program and to make it 

easier for sureties and small business 

concerns to participate. 

Section 411(g)(3) of the Small 

Business Investment Act of 1958 (the 

Act) formerly required PSB Sureties to 

be audited every year. 15 U.S.C. 

694b(g)(3). As amended by Public Law 

108–447, Div. K, section 203, the Small 

Business Reauthorization and 

Manufacturing Assistance Act of 2004, 

the Act now requires audits to be made 

at least once every three years. The 

proposed rule would contain the 

regulations to this statutory change. 

In relevant part, Section 4(b)(1) of the 

Small Business Act provides that SBA 

‘‘shall give special consideration to 

veterans of the Armed Forces of the 

United States and their survivors and 

dependents.’’ 15 U.S.C. 633(b)(1). 

Accordingly, the proposed rule would 

encourage the issuance of bonds on 

behalf of small business concerns 

owned and controlled by veterans, and 

small business concerns owned and 

controlled by service-disabled veterans, 

by SBA’s guaranty to pay 90 percent of 

a Prior Approval Program Surety’s Loss, 

thus affording such concerns more 

opportunity to obtain contracts 

generally. 

Section 411(h) of the Small Business 

Investment Act mandates the operation 

of the program ‘‘on a prudent and 

economically justifiable basis’’ and 

authorizes SBA to impose fees on both 

small business concerns and sureties, 

‘‘to be payable at such time’as may be 

determined by [SBA].’’ In accordance 

with its statutory obligation, SBA 

proposes to establish a clearer deadline 

for a Prior Approval Surety’s payment of 

the guarantee fees owed to SBA. Under 

the present regulation, such fees are 

payable in the ordinary course of the 

Prior Approval Surety’s business. The 

proposed regulation, if adopted, would 

require the payment of such fees within 

45 calendar days of SBA’s approval of 

the Prior Approval Agreement, and the 

failure to make timely payment would 

allow SBA to deny liability under its 

guarantee. No changes are contemplated 

in the comparable regulations covering 

a PSB Surety’s payment of guarantee 

fees, since such fees are forwarded with 

the PSB’s monthly bordereau. 

The proposed rule would change one 

of the standards by which SBA admits 

Sureties to the PSB Program. PSB 

Program Sureties are currently required 

to charge no more than the Surety 

Association of America’s advisory 

premium rates in effect August 1, 1987. 

The proposed rule would allow PSB 

Program Sureties to charge no more than 

the premium rates permitted under 

applicable state law, as Prior Approval 

Sureties are now allowed to do. 

Public Law 100–590 established the 

Preferred Surety Bond (PSB) program on 

a pilot basis in 1988, meaning that its 

continued existence depended upon 

affirmative Congressional action. The 

initial regulations for the program 

specified that the premium rates 

charged by PSB Sureties could not 

exceed the Surety Association of 

America’s advisory premium rates in 

effect on August 1, 1987. The Surety 

Association of America (SAA) is the 

trade association to which most, if not 

all, the prospective PSB Sureties 

belonged, and the 1987 rates were the 

latest rates. SAA discontinued its rate 

setting function shortly after 

promulgating the 1987 rates, and 

participating surety companies have 

been obligated to use the 1987 SAA 

rates for the past eighteen years despite 

economic and market place changes. 

Now that Public Law 108–447 has put 

the PSB program on a permanent legal 

basis, SBA considers it necessary to 

allow PSB Sureties to charge rates that 

reflect present economic conditions and 

thereby encourage those Sureties now in 

the PSB program to continue their 

participation, and to encourage others to 

participate. Under the Prior Approval 

Program, SBA’s other surety bond 

program, surety companies are 

permitted to use rates approved by the 

individual States. This proposed change 

will put the Preferred and Prior 

Approval Programs on the same footing 

by relying on the individual State 

oversight bodies. 

As previously mentioned, from its 

creation in 1988 until 2004, the PSB 

program was a pilot program, subject to 

automatic termination in the absence of 

affirmative Congressional action. 

Indeed, for several months in 2004 the 

PSB program ceased to exist. Now that 

the PSB program has been made 

permanent, the present regulation that 

speaks of the termination of the program 

will be removed and reserved. 

Finally, this proposed rule would 

allow Affiliates, as defined in 13 CFR 

Part 121, of PSB Sureties to participate 

in the Prior Approval program, from 

which they are presently barred. The 

term ‘‘Affiliate’’ is defined at length in 

13 CFR Part 121, but in the context of 

the present discussion it means a 

relationship in which one Surety owns 

or otherwise controls another Surety, or 

in which two or more Sureties are 

commonly owned by, or under common 

control with, a third party. A series of 

mergers and acquisitions in the surety 

industry in recent years has caused 

Sureties previously eligible to 

participate in the Prior Approval 

Program to become Affiliates of PSB 

Sureties and, under the present 

regulations, to lose their eligibility. To 

encourage and increase participation in 

the Prior Approval Program by 

otherwise qualified Sureties that are 

Affiliates of PSB Sureties, SBA proposes 

to abolish the present prohibition on 

their participation. 

Section-by-Section Analysis: 

In connection with its proposed 

amendment of § 115.31(a)(2), SBA 

proposes to amend § 115.10 by adding 

definitions of ‘‘Service-Disabled 

Veteran’’, ‘‘Small Business Owned and 

Controlled by Service-Disabled 

Veterans’’, ‘‘Small Business Owned and 

Controlled by Veterans’’, and ‘‘Veteran’’. 

In connection with its proposed 

establishment of a clear deadline for 

payment of a Prior Approval Surety’s 

guaranty fee to SBA, SBA proposes to 

amend § 115.19(g) to make the lack of 

timely payment of this fee a ground for 

denial of liability on the same terms as 

the regulation now allows such denials 

by reason of the Surety’s failure to make 

timely remittance of the Principal’s fee. 

Current § 115.21(a)(2) subjects PSB 

Sureties to annual audits. As revised, 

the paragraph would require audits at 

least once every three years, as the Act 

now requires. 

Current § 115.31 limits SBA’s liability 

on bonds issued by a Prior Approval 

Surety to 80 percent of the Surety’s loss, 

unless the total amount of the contract 

in question does not exceed $100,000 or 

the small business concern falls within 

one of the classes enumerated in 

§ 115.31(a)(2). SBA is proposing to 


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Federal Register / Vol. 71, No. 186 / Tuesday, September 26, 2006 / Proposed Rules 56051 

expand the enumerated classes to 

include small businesses owned and 

controlled by veterans or by servicedisabled veterans. SBA believes this 

action is consistent with the special 

consideration of veterans expressed in 

Section 4(b)(1) of the Small Business 

Act, as amended. Accordingly, this rule 

would amend § 115.31(a)(2) to add such 

small business concerns to the list of 

small business concerns for which SBA 

will obligate itself to pay 90 percent of 

the Prior Approval Surety’s Loss in the 

event of a contract default. This 

proposed amendment would not apply 

to bonds issued by PSB Sureties because 

the Act does not allow SBA’s guarantee 

on such bonds to exceed 70 percent. 

Current § 115.32 (c) requires the 

Surety to pay a guarantee fee to SBA ‘‘in 

the ordinary course of business.’’ The 

effect of subsequent increases in the 

Contract amount or the bond amount on 

the fees payable to SBA ‘‘in the ordinary 

course of business’’ is covered in 

§ 115.32(d)(2) and (3), respectively. SBA 

proposes to revise these paragraphs to 

impose a 45-day deadline upon the 

Surety for payment of the initial 

guarantee fee and for subsequent 

payments when increases in the 

Contract or bond amounts require 

payment to SBA. 

SBA proposes to revise § 115.60(a) to 

permit PSB Sureties to charge premiums 

no higher than those approved by the 

applicable state regulatory body, as is 

the practice with the Prior Approval 

Surety Bond Program. Sureties applying 

to participate as PSB Sureties are now 

required to agree to charge Principals 

premiums no higher than those 

recommended by the Surety Association 

of America and in effect August 1, 1987. 

13 CFR 115.60(a)(2). These premiums 

differ from the premiums approved by 

the various States today in response to 

inflation, and changes in the economy 

and in the nature of the surety business. 

The proposed change will encourage 

PSB Sureties to remain in the PSB 

program and will make the PSB program 

attractive to prospective new 

participants. SBA will allow PSB 

Sureties that have previously agreed to 

adhere to the Surety Association’s 

recommended 1987 rates to impose 

premium charges approved by the 

applicable state regulatory body if they 

wish. 

SBA proposes to remove and reserve 

present § 115.61, in conformity with the 

language of Public Law 108–447 making 

the PSB program permanent and to 

revise § 115.62 to allow Affiliates of PSB 

Sureties to participate in the Prior 

Approval Program. A series of mergers 

and acquisitions in the surety industry 

in recent years has caused Sureties 

previously eligible to participate in the 

Prior Approval Program to become 

Affiliates of PSB Sureties and, under the 

present regulations, to lose their 

eligibility. To encourage and increase 

participation in the Prior Approval 

Program by otherwise qualified Sureties 

that are Affiliates of PSB Sureties, SBA 

proposes to abolish the present 

prohibition on their participation. 

Compliance With Executive Orders 

12866, 12988, and 13132, the 

Paperwork Reduction Act (44 U.S.C. 

Ch. 35), and the Regulatory Flexibility 

Act (5 U.S.C. 601–612) 

Compliance With Executive Order 

12866 

The Office of Management and Budget 

(OMB) has determined that this rule 

constitutes a significant regulatory 

action for purposes of Executive Order 

12866. A general discussion of the need 

for this regulatory action and its 

potential costs and benefits follows. 

Regulatory Impact Analysis 

A. Regulatory Objective of Proposed 

Rule 

Program Objectives 

The objectives of the Surety Bond 

Guarantee (SBG) Program are: (1) To 

strengthen the competitive free 

enterprise system by assisting qualified 

small and disadvantaged contractors 

obtain bid, performance, payment and 

ancillary bonds who would otherwise 

be unable to obtain them without the 

SBA guarantee; (2) to enable surety 

companies to reach more small 

businesses; and (3) to manage the tax 

payers’ dollars at risk. The purpose of 

the program is to assist small, 

disadvantaged, and competitive 

opportunity gap contractors obtain 

bonding for public and private 

contracts. SBA’s guarantee provides 

incentives for sureties (companies that 

guarantee the performance of a 

contractor) to bond contractors that are 

skilled, but lack the financial strength or 

bonded track record to obtain bonding 

on reasonable terms in the standard 

market. Federal contracts valued at 

$100,000 or more and many State, local 

and private contracts require bonds. 

Many small and emerging contractors 

are unable to secure necessary bonding 

because surety companies are unwilling 

to take 100% of the risk in writing their 

bonds. Emerging small businesses lack 

the track record or financial strength to 

meet standard surety bonding 

requirements. SBA’s guarantee provides 

the incentive necessary for sureties to 

issue bonds for these contractors, who 

could not otherwise compete in the 

contracting industry. As a result, small 

businesses can establish and grow their 

businesses. 

The amendments proposed in this 

rulemaking would provide fee structure 

parity between Prior Approval Surety 

(Prior Approval) and Preferred Surety 

Bond (PSB) sureties, thus encouraging 

PSB sureties to remain in the program 

and promote the SBA-guaranteed bonds. 

Similarly, an amendment allowing 

affiliates of a PSB to participate in the 

Prior Approval Program provides 

needed flexibility to surety bond 

participants in the SBG Program to 

remain in the Program and promote its 

products. The amendments also obligate 

SBA to reimburse a higher percentage of 

loss incurred by a Prior Approval on 

bonds issued on behalf of a veteranowned small business, including 

service-disabled veterans. The 

rulemaking also deletes an obsolete 

reference to the pilot nature of the PSB 

Program, which became permanent in 

2004 legislation. 

The Program 

The SBG Program evolved from a 

pilot project created in 1971. Since its 

inception, the SBG Program has enabled 

thousands of small businesses to obtain 

Federal, State and private contracts that 

they would not otherwise have been 

able to obtain. These small business 

contracts have resulted in the creation 

of thousands of jobs. The Office of 

Surety Guarantees administers the SBG 

program through a private-public 

partnership between the Federal 

Government and the surety industry. 

SBA guarantees bonds issued by surety 

companies for construction, service and 

supply contracts and reimburses the 

sureties a percentage of the losses 

sustained if the contractor defaults. 

SBA’s guarantee provides the incentive 

necessary for sureties to issue bonds to 

qualified small businesses. 

The SBG program consists of the Prior 

Approval Program and the PSB 

Program. The Prior Approval program 

guarantees up to 90% of a surety’s loss. 

Participants must obtain SBA’s approval 

for each bond guarantee issued. Under 

the PSB program, sureties receive a 70% 

guarantee and are empowered to issue, 

service and monitor bonds without 

SBA’s prior approval. The surety bond 

guarantee programs are acknowledged 

as a major factor in the surety 

reinsurance and construction industries 

and are recognized as a primary 

stabilizing influence by those industries. 

Cost of an SBA Guaranteed Bond 

The SBA charges fees to both the 

contractor and the surety company, as 

described in the most recent edition of 


sroberts on PROD1PC70 with PROPOSALS
56052 Federal Register / Vol. 71, No. 186 / Tuesday, September 26, 2006 / Proposed Rules 

13 CFR Part 115 . SBA does not charge 

an application or bid bond guarantee 

fee. If SBA guarantees a final bond, the 

contractor and the surety each must pay 

a guarantee fee equal to a certain 

percentage of the contract amount. The 

percentages are determined by SBA and 

are published in notices in the Federal 

Register from time to time. The fees 

were most recently changed in the 

Federal Register, effective April 3, 2006. 

71 FR 9632 (February 24, 2006). When 

the bond is issued, the small business 

also pays the surety company’s bond 

premium. Currently, this charge cannot 

exceed the level approved by the 

appropriate state regulatory body for a 

Prior Approval Surety or the 1987 SAA 

rates for a PSB Surety. 

The rates assessed small businesses 

will generally increase, as surety 

companies will adopt the rates that are 

currently filed and approved by the 

individual States, and utilized on their 

accounts. Because different surety 

companies have different rate 

structures, it is difficult to estimate 

precisely the cost impact to small 

businesses. Other program costs will 

decrease, as there will be one not two 

rate structures to track by surety 

companies and the Government. 

Additionally, this change will have a 

positive impact on the program through 

increased bond activity for the small 

business community and increased 

participation in the program by surety 

companies. 

B. Baseline Costs of Existing Regulatory 

Framework 

In FY2002, the Office of Management 

and Budget (OMB) developed the 

Program Assessment Rating Tool 

(PART) to establish a systematic, 

consistent process for rating the 

performance of programs across the 

Federal government. The SBG Program 

was evaluated under the PART criteria 

in FY2005. The PART review revealed 

that program enhancements are needed 

to maximize the effectiveness of the 

SBG Program and achieve performance 

goals. In particular, it was 

recommended that the SBG Program 

develop an internet-based electronic 

application and claims processing 

system, and restructure program 

outreach. The proposed rule is an 

important component of implementing 

the PART recommendations. These 

measures will contribute to the 

sustainability and growth of existing 

and competitive opportunity gaps 

confronting small businesses by 

increasing their contract revenue and 

job creation rates. Both of these actions 

are well underway. 

The SBG program routinely tracks the 

number of surety bond guarantees 

approved, contract revenue, and the 

number of jobs created to measure its 

progress toward achieving program 

long-term outcomes. In FY 2003, SBA 

guaranteed a total of 8,974 bonds, which 

represented $594 million in final bond 

contract revenue and 5,123 jobs created. 

Although a temporary expiration of the 

PSB program in Fiscal Years (FY) 2004 

and 2005 impacted goal 

accomplishment, SBA guaranteed a total 

of 7,803 bonds in FY 2004, which 

represented $598 million in final bond 

contract revenue and 5,154 jobs created. 

In FY 2005, SBA guaranteed a total of 

5,678 bonds, which represented $488 

million in final bond contract revenue 

and 4,203 jobs. 

The SBG program has specific values 

assigned for annual program targets. The 

SBG program is included in the Cost 

Allocation Model that SBA has 

implemented. A cost per bond is 

calculated using information from that 

model, and is included in the annual 

Performance and Accountability Report 

(PAR). The increased contract revenue 

and jobs created will contribute to the 

survivability and growth of the small 

contractors that received SBG 

assistance. The program’s cost per bond 

decreased from $570 in 2002 to $408 in 

2003. In FY 2004, the program’s cost per 

bond increased slightly to $489 since 

the program activity significantly 

decreased with the expiration of the 

PSB program. In FY 2005, the program’s 

cost per bond increased to $860. The 

shutdown of the PSB Program during 

the first quarter of FY2005 and the 

proposed surety bond fee increase 

adversely affected program activity. The 

total cost of the SBG Program to the 

Federal Government is as follows: 

FY2002—$4.2 million; FY2003—$3.6 

million; FY2004—$3.8 million; 

FY2005—$4.8 million. 

The only other Federal bond 

guarantee program is the Department of 

Transportation’s (DOT) Bonding 

Assistance program authorized under 49 

U.S.C. 332 (Pub. L. 97–449). Under that 

program, the bonds must be issued for 

transportation related contracts and on 

behalf of certified minority, womenowned, and disadvantaged businesses. 

SBA guarantees bonds for construction, 

service, and supply contracts not 

exceeding $2 million. SBA assistance is 

not limited to minority, women-owned, 

and disadvantaged contractors. Few 

states have bonding assistance 

programs. There are no similar programs 

in the private sector. 

SBA’s FY2007 Budget discusses the 

SBG Program’s goals of 7,725 bond 

guarantees in both FY2006 and FY2007, 

resulting in $447 million in final bond 

contract revenue and creating 3,852 jobs 

each year. To achieve these goals, the 

FY2007 Budget states that SBA will 

continue to seek increased nationwide 

program visibility, making the SBG 

Program accessible to more small 

contractors. 

C. Potential Benefits and Costs of the 

Proposed Rule 

The amendments proposed all offer 

significant benefits. The rule offers 

incentives to PSB and Prior Approval 

Sureties to expand participation in the 

SBG Program. Most importantly, the 

proposed rule would allow PSB Sureties 

to charge the premium rates permitted 

by applicable state law rather than the 

Surety Association of America’s 

advisory premium rates as of August 1, 

1987. This provides parity of 

compensation for the PSB Sureties with 

the Prior Approval Sureties. Currently, 

the PSB Sureties are not able to charge 

current rates for the SBG bonds, as they 

are limited to rates that are nineteen 

years old. If this proposed rule is 

adopted without change and PSB 

Sureties take advantage of it, Small 

Concerns bonded by PSB Sureties will 

be paying the same premium rates as the 

Small Concerns that receive bonding 

from Prior Approval Sureties. Rate 

parity means that Prior Approval and 

PSB Sureties will be charging similar 

rates for the same SBG bond. In 

addition, the other amendments offer a 

greater SBG bonding guarantee to 

veteran-owned contractors and allow 

PSB and Prior Approval Suretires to be 

held together in a holding company 

structure as affiliates. These regulatory 

flexibilities should ensure continued 

surety bond participation in the SBG 

Program to allow small contractors to 

continue to receive the SBG Program 

guarantees in the future. 

D. Proposed Rule Alternatives 

SBA has analyzed several alternatives 

to this proposed rule. First, SBA could 

do nothing. SBA believes, however, that 

this would not further the objective of 

the SBG Program as it could lead to 

surety departures from the SBG 

Program, directly leading to fewer small 

businesses able to receive a SBG bond. 

Second, SBA could completely overhaul 

the SBG Program. SBA believes that 

most of the regulatory framework of the 

SBG Program is working and that drastic 

changes are not needed. As stated in the 

PART review and FY2007 Budget, the 

SBG Program and the small businesses 

it serves would most benefit from an 

internet-based application system and 

more program outreach, not regulatory 

overhaul. Third, SBA could act as it has, 


sroberts on PROD1PC70 with PROPOSALS
Federal Register / Vol. 71, No. 186 / Tuesday, September 26, 2006 / Proposed Rules 56053 

by proposing amendments conforming 

the rules to our commitments in the 

PART review and our FY2007 Budget. 

These amendments will allow SBA to 

retain the surety bond participation it 

needs in order to operate the program 

and continue providing bonding 

benefits to small contractors in need of 

bid, payment, performance or ancillary 

bonds necessary to obtain Federal and 

State contracts. 

E. Request for Comments 

SBA requests comment on this 

Regulatory Impact Analysis (RIA), in 

particular the assumptions made and 

the projections of costs and benefits of 

this proposed regulatory action. SBA 

also requests comments on all aspects of 

the RIA. 

Compliance With Executive Order 

12988 

This action meets applicable 

standards set forth in Sections 3(a) and 

3(b)(2) of Executive Order 12988, Civil 

Justice Reform, to minimize litigation, 

eliminate ambiguity, and reduce 

burden. The action does not have 

retroactive or preemptive effect. 

Compliance With Executive Order 

13132 

For purposes of E.O. 13132, the SBA 

has determined that the rule will not 

have substantial direct effects on the 

States, on the relationship between the 

national government and the States, or 

on the distribution of power and 

responsibilities among the various 

levels of government. Therefore, for the 

purpose of Executive Order 13132, SBA 

determines that this proposed rule has 

no federalism implications warranting 

preparation of a federalism assessment. 

Compliance With Paperwork Reduction 

Act, 44 U.S.C. Ch. 35 

SBA has determined that this 

proposed rule does not impose 

additional reporting or recordkeeping 

requirements under the Paperwork 

Reduction Act, 44 U.S.C., Chapter 35. 

Compliance With the Regulatory 

Flexibility Act, 5 U.S.C. 601–612 

The Regulatory Flexibility Act (RFA), 

5 U.S.C. 601, requires administrative 

agencies to consider the effect of their 

actions on small entities, small nonprofit enterprises, and small local 

governments. Pursuant to the RFA, 

when an agency issues a rulemaking, 

the agency must prepare a regulatory 

flexibility analysis which describes the 

impact of the rule on small entities. 

However, section 605 of the RFA allows 

an agency to certify a rule, in lieu of 

preparing an analysis, if the rulemaking 

is not expected to have a significant 

economic impact on a substantial 

number of small entities. Within the 

meaning of RFA, SBA certifies that this 

rule will not have a significant 

economic impact on a substantial 

number of small entities. Consequently, 

this rule does not meet the substantial 

number of small businesses criterion 

anticipated by the Regulatory Flexibility 

Act. There are about a dozen Sureties 

that participate in the SBA program, and 

no part of this proposed rule would 

impose any additional cost or any 

significant burden on them. The 

proposal to allow PSB Sureties to charge 

the highest premium rates permitted by 

applicable state law raises the 

possibility of an economic impact on 

those contractors that now receive their 

bonding from PSB Sureties, but out of 

843 contractors participating in the SBA 

program in FY2005, about 143 were 

bonded by PSB Sureties. Prior Approval 

Sureties are already allowed to charge 

the premium rates permitted by the 

individual State law, so the economic 

effect, if any, of this proposed rule 

would be to subject approximately 17 

percent of the contractors in the SBA 

program to the risk that they might have 

to pay the same premium rates that their 

fellow participating contractors must 

pay. 

List of Subjects in 13 CFR Part 115 

Claims, Reporting and recordkeeping 

requirements, Small businesses, Surety 

bonds. 

For the reasons stated in the 

preamble, the Small Business 

Administration proposes to amend 13 

CFR part 115 as follows: 

PART 115—SURETY BOND 

GUARANTEE 

1. The authority citation for Part 115 

is revised to read as follows: 

Authority: 5 U.S.C. app. 3; 15 U.S.C. 687b, 

687c, 694a, 694b note, Pub. L. 106–554; Pub. 

L. 108–447, Div. K, § 203. 

2. Amend § 115.10 by adding the 

following definitions at the appropriate 

places: 

§ 115.10 Definitions. 

* * * * * 

Service-Disabled Veteran means a 

veteran with a disability that is serviceconnected, as defined in Section 101(16) 

of Title 38, United States Code. 

Small Business Owned and 

Controlled by Service-Disabled Veterans 

means: 

(1) A Small Concern of which not less 

than 51 percent is owned by one or 

more Service-Disabled Veterans; or a 

publicly-owned Small Concern of which 

not less than 51 percent of the stock is 

owned by one or more Service-Disabled 

Veterans; and 

(2) The management and daily 

business operations of which are 

controlled by one or more ServiceDisabled Veterans, or in the case of a 

Service-Disabled Veteran with 

permanent and severe disability, the 

spouse or permanent caregiver of such 

Veteran. 

Small Business Owned and 

Controlled by Veterans means: 

(1) A Small Concern of which not less 

than 51 percent is owned by one or 

more Veterans; or a publicly-owned 

Small Concern of which not less than 51 

percent of the stock is owned by one or 

more Veterans; and 

(2) The management and daily 

business operations of which are 

controlled by one or more Veterans. 

* * * * * 

Veteran has the meaning given the 

term in Section 101(2) of Title 38, 

United States Code. 

3. Revise § 115.19(g) to read as 

follows: 

§ 115.19 Denial of Liability. 

* * * * * 

(g) Delinquent fees. The Surety has 

not remitted to SBA the Principal’s 

payment for the full amount of the 

guarantee fee within the time period 

required under § 115.30(d) for Prior 

Approval Sureties or § 115.66 for PSB 

Sureties, or has not made timely 

payment of the Surety’s fee within the 

time period required by § 115.32(c). 

SBA may reinstate the guarantee upon 

a showing that the contract is not in 

default and that a valid reason exists 

why a timely remittance or payment 

was not made. 

* * * * * 

4. Revise § 115.21(a)(2) to read as 

follows: 

§ 115.21 Audits and investigations. 

(a) * * * 

(1) * * * 

(2) Frequency of PSB Audits. Each 

PSB Surety is subject to audit at least 

once every three years by examiners 

selected and approved by SBA. 

* * * * * 

5. Revise § 115.31(a)(2) to read as 

follows: 

§ 115.31 Guarantee percentage. 

(a) * * * 

(1) * * * 

(2) The bond was issued on behalf of 

a small business owned and controlled 

by socially and economically 

disadvantaged individuals or on behalf 

of a qualified HUBZone small business 

concern, or on behalf of a small business 


sroberts on PROD1PC70 with PROPOSALS
56054 Federal Register / Vol. 71, No. 186 / Tuesday, September 26, 2006 / Proposed Rules 

owned and controlled by veterans or a 

small business owned and controlled by 

service-disabled veterans. 

* * * * * 

6. Revise § 115.32(c) and (d)(2) to read 

as follows: 

§ 115.32 Fees and Premiums. 

* * * * * 

(c) SBA charge to Surety. SBA does 

not charge Sureties application or Bid 

Bond guarantee fees. Subject to 

§ 115.18(a)(4) the Surety must pay SBA 

a guarantee fee on each guaranteed bond 

(other than a Bid Bond) within 45 

calendar days after SBA’s approval of 

the Prior Approval Agreement. The fee 

is a certain percentage of the bond 

premium determined by SBA and 

published in Notices in the Federal 

Register from time to time. The fee is 

rounded to the nearest dollar. SBA does 

not receive any portion of a Surety’s 

non-Premium charges. See paragraph (d) 

of this section for additional 

requirements when the Contract or bond 

amount changes. 

(d) * * * 

(1) * * * 

(2) Increases; fees. Notification of 

increases in the Contract or bond 

amount under this paragraph (d) must 

be accompanied by the Principal’s 

check for the increase in the Principal’s 

guarantee fee computed on the increase 

in the Contract amount. If the increase 

in the Principal’s fee is less than $40 no 

payment is due until the total amount 

of increases in the Principal’s fee equals 

or exceeds $40. The Surety’s check for 

payment of the increase in the Surety’s 

guarantee fee, computed on the increase 

in the bond Premium, must be 

submitted to SBA within 45 calendar 

days of SBA’s approval of the 

supplemental Prior Approval 

Agreement, unless the amount of such 

increased guarantee fee is less than $40. 

When the total amount of increases in 

the guarantee fee equals or exceeds $40, 

the Surety’s check must be submitted to 

SBA within 45 calendar days. 

* * * * * 

7. Revise § 115.60(a)(2) to read as 

follows: 

§ 115.60 Selection and admission of PSB 

Sureties. 

(a) * * * 

(1) * * * 

(2) An agreement that the Surety will 

neither charge a bond premium in 

excess of that authorized by the 

appropriate state insurance department, 

nor impose any non-premium fee unless 

such fee is permitted by applicable state 

law and approved by SBA. 

* * * * * 

§ 115.61 [Removed & Reserved] 

8. Remove and reserve § 115.61. 

9. Revise § 115.62 to read as follows: 

§ 115.62 Prohibition on participation in 

Prior Approval program. 

A PSB Surety is not eligible to submit 

applications under subpart B of this 

part. This prohibition does not extend to 

an Affiliate, as defined in 13 CFR 

§ 121.103, of a PSB Surety that is not 

itself a PSB Surety provided that the 

relationship between the PSB Surety 

and the Affiliate has been fully 

disclosed to SBA and that such Affiliate 

has been approved by SBA to 

participate as a Prior Approval Surety 

pursuant to section 115.11. 

Dated: August 29, 2006. 

Steve C. Preston, 

Administrator. 

[FR Doc. 06–8205 Filed 9–25–06; 8:45 am] 

BILLING CODE 8025–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2006–25891; Directorate 

Identifier 2006–NM–186–AD] 

RIN 2120–AA64 

Airworthiness Directives; Airbus Model 

A300 and A310 Airplanes; and Model 

A300 B4–600, B4–600R, and F4–600R 

Series Airplanes, and Model C4–605R 

Variant F Airplanes (Collectively Called 

A300–600 Series Airplanes) 

AGENCY: Federal Aviation 

Administration (FAA), Department of 

Transportation (DOT). 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: The FAA proposes to adopt a 

new airworthiness directive (AD) for 

certain Airbus Model A300 and A310 

airplanes; and Model A300 B4–600, B4–

600R, and F4–600R series airplanes, and 

Model C4–605R Variant F airplanes 

(collectively called A300–600 series 

airplanes). This proposed AD would 

require replacing the pressure limiter of 

the parking brake system with a new or 

modified pressure limiter. This 

proposed AD results from a report 

indicating that failure of the parking 

brake system occurred on a Model 

A300–600 airplane. We are proposing 

this AD to prevent failure of the parking 

braking system and interference with 

emergency use of the brake pedals, 

which could lead to airplane collision 

with surrounding objects or departure 

from the runway. 

DATES: We must receive comments on 

this proposed AD by October 26, 2006. 

ADDRESSES: Use one of the following 

addresses to submit comments on this 

proposed AD. 

• DOT Docket Web site: Go to 

http://dms.dot.gov and follow the 

instructions for sending your comments 

electronically. 

• Government-wide rulemaking Web 

site: Go to http://www.regulations.gov 

and follow the instructions for sending 

your comments electronically. 

• Mail: Docket Management Facility, 

U.S. Department of Transportation, 400 

Seventh Street SW., Nassif Building, 

Room PL–401, Washington, DC 20590. 

• Fax: (202) 493–2251. 

• Hand Delivery: Room PL–401 on 

the plaza level of the Nassif Building, 

400 Seventh Street SW., Washington, 

DC, between 9 a.m. and 5 p.m., Monday 

through Friday, except Federal holidays. 

Contact Airbus, 1 Rond Point Maurice 

Bellonte, 31707 Blagnac Cedex, France, 

for service information identified in this 

proposed AD. 

FOR FURTHER INFORMATION CONTACT: Tom 

Stafford, Aerospace Engineer, 

International Branch, ANM–116, FAA, 

Transport Airplane Directorate, 1601 

Lind Avenue, SW., Renton, Washington 

98057–3356; telephone (425) 227–1622; 

fax (425) 227–1149. 

SUPPLEMENTARY INFORMATION: 

Comments Invited 

We invite you to submit any relevant 

written data, views, or arguments 

regarding this proposed AD. Send your 

comments to an address listed in the 

ADDRESSES section. Include the docket 

number ‘‘FAA–2006–25891; Directorate 

Identifier 2006–NM–186–AD’’ at the 

beginning of your comments. We 

specifically invite comments on the 

overall regulatory, economic, 

environmental, and energy aspects of 

the proposed AD. We will consider all 

comments received by the closing date 

and may amend the proposed AD in 

light of those comments. 

We will post all comments we 

receive, without change, to http:// 

dms.dot.gov, including any personal 

information you provide. We will also 

post a report summarizing each 

substantive verbal contact with FAA 

personnel concerning this proposed AD. 

Using the search function of that web 

site, anyone can find and read the 

comments in any of our dockets, 

including the name of the individual 

who sent the comment (or signed the 

comment on behalf of an association, 

business, labor union, etc.). You may 

review DOT’s complete Privacy Act 

Statement in the Federal Register 


sroberts on PROD1PC70 with PROPOSALS